Most people believe that a trust is a complicated official legal estate planning document signed by a person and notarized. However, at its most basic level, a trust is a relationship that exists between a settlor/trustor (terms interchangeably used to refer to the creator of the trust), a trustee (the person who legally holds title to the trust property) and a beneficiary (the person or persons for whose benefit the trust is created).
While a trust relationship is often memorialized in writing, in some cases, a trust does not have to be in writing, much less notarized. There are some situations where a trust can be oral. A trust can also result as a matter of law (resulting trust), or arise based on circumstances (constructive trust).
A trust can have multiple settlors/trustors, trustees, and beneficiaries. The trust can also have the same person as the settlor/trustor, trustee, and beneficiary of a trust. It seems weird, but it’s true – a single person can create his own trust for his own benefit. For most people creating their own trust for their own benefit is unnecessary and cumbersome. However, under special circumstances it could be advisable, such as to potentially limit tax liability, to monitor spending habits, or as part of a settlement.
In all instances, the requirement for a “trust” is the same – the settlor must transfer the property to the trustee of the trust, who legally holds title to the property in trust for the benefit of the beneficiary. While legal title is held by the trustee, equitable title is held by the beneficiary. In other words, while the trustee is the owner of the property on paper, the true owner – so to speak – is the beneficiary for whose benefit the trustee holds the property.